Proposed new regulations target growers, advertising

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A fifth of the marijuana-growing operations in Boulder provide product to out-of-town dispensaries and don't generate sales tax revenue for the city.

Whether to limit cultivation centers to those that serve Boulder dispensaries or charge additional fees are among proposed changes to the city's medical marijuana rules that the City Council will consider Tuesday.

A proposed ordinance updating the current law would also raise fees for all marijuana licenses and renewals, limit advertising, impose new regulations on manufacturers of infused products and bar landlords from renting to unlicensed growers.

Potential limitations on grow operations linked to out-of-town dispensaries are not in the existing ordinance language, which is scheduled for a first reading Tuesday. Rather, the City Attorney's Office is seeking feedback from the council before drawing up those regulations.

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In a memo to the City Council on the proposed changes, city officials described a winnowing process that has reduced an original applicant pool of 125 license requests to 27 dispensaries or medical marijuana centers, 34 cultivation facilities and six infused product manufacturers.

However, administering the city's regulations, including assessing the impact of state and federal court cases, has cost more than the city anticipated. Because the city refunded a portion of the license fee to businesses that were denied, it collected a net amount of $496,350 but spent an estimated $665,000 administering the program, the memo said.

The ordinance proposes increasing the license application fee to $3,790 from $3,115 and the renewal to $2,750 from $2,075.

The ordinance would also prohibit dispensaries within 1,000 feet of a school. The city's current ordinance establishes a 500-foot buffer, but the federal government has targeted dispensaries within a 1,000-foot radius for additional enforcement, forcing several dispensaries to close or merge.

Another provision would ban most marijuana advertising, with the exception of a sign on the same lot as the business and advertising in print publications.

City officials also want to require manufacturers of infused products to disclose their extraction methods in an operating plan. The memo said inspectors have found many manufacturers using equipment that isn't intended for food production, including washing machines.

The ordinance also seeks to give police more tools to pursue unlicensed growers, who are exempt from many state regulations if they are caregivers for five patients or fewer. The memo described situations in which inspectors believed medical marijuana was being grown in a building without a license, but the landlords would not assist the police in verifying the activity.

The ordinance proposes making it illegal for landlords to knowingly rent space to an unlicensed grow operation and requires that landlords allow police to enter a building for the limited purpose of determining if there is a marijuana business there.

The City Council will consider whether to impose minimum fines to discourage the practice.

The council also will take up the question of how to deal with grow operations that are linked to out-of-town dispensaries. Because many towns ban grow operations or stopped allowing new marijuana businesses before the state instituted the requirement that dispensaries grow 70 percent of their own product, Boulder has a number of grow operations that supply marijuana to dispensaries in other cities.

"When a cultivation facility located in Boulder does not have a center in Boulder, the city does not levy or collect a sales tax on the medical marijuana sold," the memo said. "The city only collects a use tax, which is a fraction of the sales tax revenues. The sales tax from the sales of medical marijuana grown in Boulder is realized by another city."

Some officials have also expressed concerns about the amount of industrial space taken up by grow operations. According the memo, a survey of industrial space in Boulder found that grows took up less space than previously believed.

Nonetheless, the City Attorney's Office asked the City Council to weigh in on whether to ban out-of-town grow operations or to impose a fee or tax on cultivation centers.

In a survey on the city's website about some of the new regulations, respondents were nearly evenly divided on making the city's code match the federal 1,000-feet restriction. Slightly more than 45 percent of respondents opposed advertising restrictions, while 40 percent supported them.

Dispensary owners who were contacted for this story did not return calls Friday afternoon.

Boulder attorney Jeff Gard, who has represented several medical marijuana businesses, said his biggest concern is what he perceives as a lack of due process for marijuana businesses accused of violations.

"It looked to me like a wish list from the City Attorney's Office to make it easier to shut it down," Gard said.

Gard said the city should hold hearings when businesses are accused of violations, as now happens with liquor license holders.

He also said information the city is seeking from manufacturers of infused products would force them to reveal proprietary methods.

"It's hard to disclose to the city without disclosing to a competitor," he said.

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